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On Thursday, stocks extended Wednesday’s losses, despite an array of economic reports that were generally in line with expectations. The specter of the Fed backing off of further stimulus earlier than expected left many investors questioning the wisdom of committing more money to stocks.

At the close, the Dow Jones Industrial Average was off 47 points at 13,881, the S&P 500 fell 10 points to 1,502, and the Nasdaq lost 33 points at 3,131. The NYSE traded 813 million shares and the Nasdaq crossed 460 million. Decliners outnumbered advancers by 2.3-to-1 on both major exchanges.

The CBOE Volatility Index (VIX), also known as the “fear index,” jumped 25% in just the past two days, as fear gripped the markets. This is a distinctly bearish turn. Although it may not have long-term implications, it does raise a near-term red flag and a yellow caution flag for the intermediate term.

The broad-based NYSE Composite Index suffered a bearish near-term trendline break. The breakdown was punctuated by opening a gap as it broke the line, which is not a good sign.

The index may find rest at the midpoint of a breakaway gap opened in early December at 8,547 to 8,571. Coincidently, the major support line, now at about 8,560, rests at close to the midpoint of that gap and now is the major support line for the index.

The Nasdaq’s chart will provide no solace for the bulls. On Thursday, the index plummeted through its bullish channel, leaving a gap in its wake. A break through the immediate support at its 50-day moving average at 3,105 would turn the intermediate trend bearish. However, like the NYSE, perhaps it will stabilize within the upside gap of early December at 3,021 to 3,083.

Conclusion: In just two days, the stock market’s outlook has changed as the near-term trend has reversed and the intermediate-term trend is in doubt. The downturn has been accompanied by gaps down, increased volume and bearish breadth, along with a big jump in volatility.

The S&P 500 held above the psychologically important 1,500; however, the real support for the index is at 1,475 (see S&P chart in Feb.19 Daily Market Outlook).

Traders should continue to pursue near-term bear market strategies. But longer-term investors, while focusing on new “buy under” prices, should refrain from taking new positions until the current decline’s force is more clearly defined. Look for statements of moderation from the Fed, since it was the minutes of the last meeting that turned the market away from its newly achieved success.